I’ve read numerous stories of people who had been threatened with wage garnishment by unscrupulous debt collectors. I understand it can be very scary to think that your employer would know that you were so heavily in debt that someone was going to garnish your wages.
Only the court
Here’s the good news. No debt collector can garnish your wages. He can harass you but only a court can order your employer garnish your wages. For that matter, if you have a debt collector harassing you, you can stop it. The Fair Debt Collection Practices Act (FDCPA) mandates that debt collectors are not to call you before 8:00 AM or after 9:00 PM at night. Plus, you can stop the harassment by sending what’s called a cease-and-desist letter to any debt collector that’s hassling you, which will prevent him from calling you again in the future.
If there is a court order
The bad news is that if a judge enters an order for wage garnishment, it will show up in public records. It will also show up as a debt on your credit report and will definitely affect your credit score. Of course, just about all things related to credit affects your credit score. If you make a late payment, have not enough credit or too much credit or even zero balances on five credit cards, these can lower your score.
Why all this affects your credit score
I have read that the reason why all of these things affect your credit score is because the banks and credit card companies look for every little possible excuse to charge you a higher interest rate. I can neither confirm nor deny that this is true. However, I do know what your credit score is based on though I also don’t know precisely how it’s calculated.
The five components
Your credit score is a three-digit representation of your credit reports. It’s calculated using a formula or algorithm originally developed by the company FICO. No one but FICO knows this algorithm but the experts believe it’s based on five components. They are credit history, credit utilization, length of credit history, types of credit used and recent searches for credit. Credit history or how well you’ve used credit accounts for 35% of your score. If you are late in making your payments on bills, such as a credit card, your mortgage or an auto loan, your FICO score will go down. On the other hand, if you pay your bills on time your FICO score should go up.
Good and bad credit scores
Like it or not, your credit score pretty much rules your financial life. If you have a good score (750 and above), you should be able to get any credit you apply for. Conversely, if you have a low credit score (less than 580) you’ll have a hard time getting credit of any kind. And you will definitely pay higher interest rates than if you had a good credit score.
Keep on top of your score
As you can see, it’s important for you to know your credit score. You can get it at the website www.myfico.com or from any of the three credit reporting bureaus –Experian, Equifax and TransUnion.
Unfortunately, the only place you can get your true FICO score is from FICO. The three credit reporting bureaus have created their own credit-scoring model they call VantageScore. While it won’t be absolutely identical to your FICO score, it will be close enough to give you a good idea of where you rank in terms of credit worthiness.
